Loan Against Shares

Last Updated: 29 Jun 2026

Whether it is to meet financial emergencies or fulfil certain short-term or long-term goals, availing of a loan has become easier and acceptable than ever before. However, with such high demand for loans, they are accompanied with high-interest rates that make them unapproachable and unaffordable for numerous people. Moreover, they often require the placement of cherished possessions or real estate as collateral, making them a risky option.

If you are looking to avail of a loan but do not want to trap your physical possessions, an effective alternative can allow you to get a loan and make the most of your share market investments – a loan against demat account shares.

How does a loan against demat shares work?

A loan against your demat shares is a process through which you can avail of a loan by pledging your shares as collateral. A loan against demat shares helps you monetise your investments without selling them off to realise the capital amount. A loan against demat shares requires no collateral or additional securities apart from the shares already in your demat account.

Here are some points that make a loan against the demat shares an ideal borrowing option:

1.It’s better to apply to the same financial institution:

You can avail of a loan from the same financial institution from which you are availing of the Demat account service. If you avail of your loan from the same financial institution that holds your demat account, the disbursal of your loan against demat shares becomes seamless. In essence, you are simply borrowing the funds from the financial institution as it pledges your shares against the received funds.

You can ensure this ease of disbursal by making sure to open a demat account with a reputed financial institution that provides convenient loans against securities.

2.Benefits of loan against demat shares:

When you avail of a loan against demat shares, your shares are essentially held as collateral. While your demat shares are pledged as security for the loan, you still continue to receive the various benefits of your share investments. This includes receiving and retaining not only the dividends but also your due bonuses and rights.

3.Eligibility criteria for availing of a loan against demat shares:

To avail of a loan against the shares in your demat account, you must first ensure that you are eligible for the loan process. Here is the eligibility criteria:

• You must be in the age range of 18 to 65 years.
• Only the shares in the name of individuals can be pledged. You cannot pledge shares in the name of minors, HUFs, NRIs and corporations.
• You will also be required to submit certain essential documents. These include identity proof, proof of address, proof of income and a statement from your DP.
• You cannot pledge the shares of a company you are a Director or a Promoter.

What are the features of loans against Demat shares?

The loan you avail against the shares in your Demat account comes with various features that differentiate it from other forms of loans. Here are some of the most important features you should know about:

• Your Demat shares can be pledged to avail of a loan amounting to Rs. 20 lakhs.
• Loan against Demat shares is often cheaper than personal loans and offer interest rates in the range of 12-18% p.a.
• Loans against Demat shares do not require guarantors. Moreover, they typically do not have any prepayment charges.
• The value of the pledged shares is assessed every week.

What to avoid while availing of a loan against Demat shares?

While availing of loans against the shares in your Demat account is a convenient option, it is important to utilise these funds responsibly and cautiously.

Some investors avail of loans against their Demat shares only to reinvest the money back into the market. However, if the market goes into a bearish trend, this move can result in considerable losses as you will have to still pay the interest to the financial institution. Therefore, it is recommended to avoid this strategy. Instead, it is best to utilise the loan amount for financial emergencies or to meet financial goals soon. These can include covering expenses for household, wedding, education and capital for business investments.

Conclusion

By availing of a loan against your Demat shares, you too can avail of the borrowing benefits of your share market investments. The key is finding the right financial institution that can provide you with an ideal Demat account and a facility to avail a loan against your Demat shares. You can consider opening a trading and Demat account in India with IIFL.

IIFL offers its investors an all-in-one account through which you can make various investments via a single technology backed trading platform. Moreover, the account also offers investors the benefit of availing a loan against securities, including Demat shares.